CONTROL BIONICS LIMITED — Interim / Quarterly Report 2023

Apr 26, 2023

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27 April 2023

ASX ANNOUNCEMENT (ASX:CBL)

QUARTERLY ACTIVITIES REPORT & APPENDIX 4C QUARTER ENDED 31 March 2023

Highlights

• Sales for the quarter were consistent with Q2 FY23 at $1.24m

• US Q3 FY23 sales were up almost 30% over Q2 FY23 to US$765k

• Q3 FY23 Cash Receipts from sales of $1.15m was down 20% over Q2 FY23 receipts primarily due to timing of collections from US insurance entities

• Key financial metrics remain consistent with FY forecast

• $1.3m cash at 31 March 2023

• The Board has approved initiatives to raise additional capital to meet operational and investment needs of the business

• Launch of DROVE in April – Control Bionics’ autonomous wheelchair module

Control Bionics Limited (ASX: CBL) is pleased to announce its Activity Report and Appendix 4C for the quarter ended 31 March 2023.

Commenting on the quarter, Control Bionics CEO, Jeremy Steele said:

“Joining the business at the start of this quarter I am pleased with how the business has performed and am confident in the existing opportunities for the business to expand. While the group had a slower February 2023, which affected our quarterly results, sales stepped back up in March, and we are confident that this trend will continue.

I am particularly pleased with our performance in the US which has had a great quarter. Our Australian business has a strong forward order book, with the timing of revenue a function of approval timings from the NDIS. Our rental book continues to grow as an increasing amount of our sales commence with rentals (with the customer then buying out the system after the initial rental period of 3 or 6 months). We continue to manage costs tightly as we finish out the financial year.

In April, we launched DROVE, our autonomous wheelchair module. The launch was well attended and attracted significant media attention and industry interest. We are now working to finalise testing with 10 units currently in production.

Control Bionics Limited Registered Office: Level 5, Suite 5.01, 697 Burke Road, Camberwell, Victoria, 3124, Australia T: +61 3 9897 3576 W: www.controlbionics.com ABN: 45 115 465 462

Operational Performance

(a) North America

Q3 FY23 sales through North American operations increased by almost 30% to US$765k with March a particularly strong month.

(b) Australia

Q3 FY23 reported sales for the Australian operations were A$200k. While a reported decrease in sales from Q2 FY23, the continued success of our rental program is locking in future revenue. The Sales pipeline in Australia remains strong.

(c) New Market Development

We are working with our distributor in Japan to align our product range with the needs of the Japanese market. We recently commenced sales of our Neuronode device as a lower cost option for Japanese customers. This has already generated sales in Q4 FY23, and we anticipate further sales growth in subsequent quarters.

(d) Product development

The Company continues to develop and extend its product range in order to target expanded sales opportunities and new user groups. Notable actions in the quarter included:

• In addition to the ongoing work to miniaturise our Neuronode technology, we are currently assessing opportunities to use our EMG technology in adjacent markets.

• Our DROVE autonomous wheelchair control module was launched at Deakin University on 19 April. During the quarter we finalised our design for scale production and our additional testing.

Quarterly cashflows and cash at bank

The Group results reflected the following:

• Total operating cash outflows of $1.67m, was up over the previous quarter. This was largely driven by one-off or non-recurring costs including payment of annual insurance premiums, CEO recruitment costs and consultant fees related to the further registration of CBL products within the US medical system, new market expansion costs and finalisation of the new DROVE product.

• Cash balance as at 31 March 2023 was $1.312m.

Business Strategy

Since IPO in December 2020, the Company has embarked on a considered investment strategy to build out the business platform that maximises the long-term sales potential of the NeuroNode technology in the Australian, North American and more recently Japanese assistive technology markets, and we are now open and ready for business in all of these markets.

As our experience and time in these markets has matured, we continue to develop and refine our strategy for long term success. Our focus for the business continues to be centred on

these markets and success for Control Bionics will be characterised by performance in the following areas:

• Scaling the Australian operations which has a profitable operating model at this time and provide opportunities for further growth;

• Continued growth in the US to move our subsidiary to a breakeven position. We expect to see the continued benefit of our time in this market, which requires our salespeople to build a referrer base over some years to extract the best outcome. In addition, we are working more closely with our distributors in this market which will drive further sales;

• We are seeing new opportunities for growth in Neuronode sales, particularly in markets like Japan; and

• With our DROVE product now launched, our team in Australia will be working with local partners to commence sales.

As we enter the last months of FY23 we will be working to build out our plans for FY24 that will see us benefit from the investment and work done since the business listed.

ASX Additional information

(a) Expenditure on business activities

Pursuant to Listing Rule 4.7C.1, a summary of the expenditure incurred on the above business activities for the quarter:

Expenditure Category	Amount $’000
Staff costs1	1,349
Product manufacturing	875
Administration and corporate	390
Research and development2	38
Advertising and marketing	124
Leased assets	42

1. Includes staff costs directed towards R&D

2. Excludes Staff costs directed towards R&D

(b) App 4C

The amount included in section 6.1 of the Appendix 4C is the payment of fees to Executive Directors and their related parties and fees to Non-Executive Directors.

This ASX announcement has been approved for release by the Board of Control Bionics Limited.

About Control Bionics:

Control Bionics is a medical device company assisting patients whose ability to communicate verbally or via text and social media is compromised by illnesses such as Motor Neurone Disease (MND)/ Amyotrophic Lateral Sclerosis (ALS), Spinal Cord Injury, Traumatic Brain Injury and Cerebral Palsy among others. Our core patented NeuroNode technology is a wireless wearable device that detects minute signals sent from the brain to any skeletal muscle and is captured as Electromyography (EMG) signals which are processed on personal computers, smartphones and tablets to generate text, text to speech, email and other computer controlled functions. Our

technology is integrated with eye gaze technology whereby the eye gaze enables a cursor to be moved about a computer screen, driven much like a mouse, and the NeuroNode acts as like the mouse button. Control Bionics produces the only system to harness three modalities – touch, eye movement and EMG control – which combined yield unique benefits in terms of the ability of patients to express themselves with significantly faster speed and less fatigue.

Control Bionics recently extended its offering to mobility with the launch of DROVE – the autonomous wheelchair module. DROVE allows powered users the independence to operate their wheelchairs in their own homes for the first time.

Control Bionics operates in North America, Australia, Singapore and Japan.

Investors and Media

Jeremy Steele - CEO jsteele@controlbionics.com Brett Crowley - Company Secretary brettcrowley@controlbionics.com

For further information visit the website: https://www.controlbionics.com/

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

Control Bionics Limited

Name of entity	Name of entity	Name of entity
Control Bionics Limited
ABN 45 115 465 462	**Quarter ended (“current quarter”) **
	31 March 2023
Consolidated statement of cash flows	Current quarter ($A’000)	Year to date (6 months) ($A’000)
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material)1 1.9 Net cash from / (used in) operating activities	1,152 (38) (875) (124) (42) (1,349) (390) - 6 (7) - - -	4,150 (242) (2,921) (301) (129) (4,022) (902) - 17 (31) - - -
	(1,667)	(4,381)

Consolidated statement of cash flows	Current quarter ($A’000)	Year to date (6 months) ($A’000)
2. Cash flows from investing activities 2.1 Payments to acquire or for: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.2 Proceeds from disposal of: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities	- - (1) - - - - - - - (42) - - - -	- - (119) - (35) - - - - - (42) - - - -
	(43)	(196)
3. Cash flows from financing activities 3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt securities 3.3 Proceeds from exercise of options 3.4 Transaction costs related to issues of equity securities or convertible debt securities 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material)1 3.10 Net cash from / (used in) financing activities	- - - - - - - - -	- - 749 - - (48) - - -
	-	701

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter ($A’000)	Year to date (6 months) ($A’000)	Year to date (6 months) ($A’000)
4. 4.1 4.2 4.3 4.4 4.5 4.6	Net increase / (decrease) in cash and cash equivalents for the period Cash and cash equivalents at beginning of period Net cash from / (used in) operating activities (item 1.9 above) Net cash from / (used in) investing activities (item 2.6 above) Net cash from / (used in) financing activities (item 3.10 above) Effect of movement in exchange rates on cash held Cash and cash equivalents at end of period	3,026 (1,667) (43) - (4)	5,214 (4,381) (196) 701 (26)
		1,312	1,312
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts		Current quarter $A’000		Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)		1,312 - - -		3,026 - - -
		1,312		3,026
6. Payments to related parties of the entity and their associates			Current quarter $A’000
6.1 Aggregate amount of payments to related parties and their associates included in item 1 6.2 Aggregate amount of payments to related parties and their associates included in item 2 Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a explanation for, such payments.			175
			-
			description of, and an

7. 7.1 7.2 7.3 7.4 7.5 7.6	Financing facilities Note: the term “facility’ includes all forms of financing arrangements available to the entity. Add notes as necessary for an understanding of the sources of finance available to the entity. Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000 Loan facilities - - Credit standby arrangements - - Other (please specify) – see below - - Total financing facilities - - Unused financing facilities available at quarter end - Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
		-	-
		-	-
		-	-
		-	-

8.	Estimated cash available for future operating activities	$A’000
8.1 8.2 8.3 8.4 8.5 8.6	Net cash from / (used in) operating activities (item 1.9) (1,667) Cash and cash equivalents at quarter end (item 4.6) 1,312 Unused finance facilities available at quarter end (item 7.5) - Total available funding (item 8.2 + item 8.3) 1,312 Estimated quarters of funding available (item 8.4 divided by item 8.1) 1 Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as “N/A”. Otherwise, a figure for the estimated quarters of funding available must be included in item 8.5. If item 8.5 is less than 2 quarters, please provide answers to the following questions: 8.6.1 Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?	(1,667) 1,312 -
		1,312
		1
	Answer: The Company expects lower cash outflows in the next quarter, receipt of the FY22 R&D tax incentive of approximately $280k and has initiatives to raise additional capital for future needs.
	8.6.2 Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?
	Answer: The Board has approved initiatives to raise additional capital to meet operational and investment needs of the business, and has high confidence of success.

• 8.6.3 Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?

Answer: The Company expects to continue its operations through reduced cash outflows in subsequent quarters, and by securing financing from a variety of options.

Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Date: 27 April 2023

Authorised by: By the Board

(Name of body or officer authorising release – see note 4)